Can farmers cut costs without boll buggies, module builders?

How do costs of a four-cotton picker system based on the standard six-row cotton picker supported by boll buggies and module builders compare with a competing system based on the new six-row picker with onboard module builder.

By considering a specific harvesting system with a given number of pickers we can establish the number of boll buggies, module builders and tractors per standard cotton picker. The costs used in this article reflect a 38-inch solid planting pattern.

Four critical parameters required for the cost calculations of the components of both systems are reported in Table 1.

When available, the Mississippi State University 2006 budget estimates of costs are used (Cotton 2006 Planning Budgets, MSU, Ag Ec Budget Rep 2005-001). The only exception is that operator labor is increased to $12.57 per hour and other labor cost is increased to $8.51 per hour.

The picker with an onboard module builder (not listed by MSU) is priced at $80,000 more than the standard cotton picker. Fuel is priced at $2.23 per gallon, and the interest rate is set at 7 percent. Per-acre cost estimates used in this article are summarized in Table 2.

The standard system has four pickers, four boll buggies, four module builders, four small tractors, four large tractors, 12 operator laborers and eight other laborers.

The new system has four pickers that make their own modules, but no boll buggies, module builders, or tractors. It requires only four operator laborers and only two other laborers.

Each system requires a pickup truck. The cost of a pickup devoted to a specific task is difficult to estimate accurately, and is not a part of this study. It is assumed to be a part of general farm overhead cost.

Table 3 summarizes the cost per acre. Operator labor is reported as part of the power unit (picker per tractor) direct cost (see Table 2).

A few of the larger components of the 22 percent savings in harvesting costs of $20.80 per acre are:

Initial equipment cost is reduced from $2.245 million to $1.743 million, a reduction of $502,000 — or 29 percent.

Operator labor cost during the 200-hour harvest is reduced from $30,168 to $10,056, a savings of 67 percent.

Other labor cost during harvest is reduced by 75 percent.

Fuel cost during harvest is lowered from $13,077 to $8,019 — a savings of 39 percent.

The per acre savings of 22 percent (tables 3 and 4) is not related to yield. However, actual savings (expressed as cents per pound) in a given year when production (yield) is known is related to yield per acre.

A performance ratio of 0.172 hour per acre (or 5.814 acres per hour) and annual hours of use equaling 200 would result in 1,162 acres per picker — 4,648 acres for the four-picker system.

Annual fixed cost is not related to acres harvested. The new system saves ($1.95 × 4 × 1,162) $9,064 in annual fixed cost.

Direct cost per acre does not vary as the number of acres harvested changes. Hence, annual direct cost depends on the number of acres harvested. Farmers should manage for an early harvest initiation and improved performance rate (more acres per hour) to safely increase their annual acres per picker and maximize the savings in annual direct cost.

If 4,500 acres are harvested with four pickers, the direct cost savings associated with the new system is (4,500 × $18.65) $83,925. When 5,000 acres are harvested, the annual savings in direct cost increases to $93,250.

Total (direct cost plus fixed cost) savings on 5,000 acres are $102,314 with the new system, compared to the standard system requiring boll buggies and module builders and the tractors to support them.

Many Mid-South cotton farmers with six-row pickers currently use them more than 200 hours per year.

What is the impact of increasing annual hours of use? Many economists will “explain” that if annual hours of use increases, then years or length of useful life must decrease and repairs and maintenance will increase so that per acre costs remain unchanged. I believe a longer Mid-South cotton harvest season will likely reduce the average performance rate (hour per acre or acres per hour) for the harvest season.

If annual hours of use impacts other parameters, we do not have estimates of the change. Therefore, researchers typically assume no impacts so that additional calculations can be made.

If we assume an increase in annual hours of use for the pickers to 300 only impacts per acre fixed cost (does not impact length of life, repair and maintenance or performance rate) then the only numbers changed are fixed costs for standard cotton pickers, pickers with an onboard module builder, boll buggies, and module builders in Table 2. The four estimates are simply reduced by one-third.

This increases the difference in fixed costs for the two systems to $3.36 per acre (from 4 percent to 9 percent) in Table 3. The total cost of the standard system is decreased by $16.09 (17 percent) to $80.30, and the total cost of the new system is reduced by $17.30 (23 percent) to $58.29. The savings per acre is increased to $22.01 — from 22 percent to 27 percent of the $80.30 estimate.

A performance rate of 0.172 and annual hours of use equaling 300 results in 1,744 acres per picker — 6,976 acres for four pickers. If 6,000 acres are harvested then total annual savings associated with the new system is (6,000 × 22.01) $132,060. If 7,000 acres are completed, the annual savings increase to $154,070.

All the estimates in Table 4 change. The estimates of harvesting cost per pound based on 300 annual hours of use for the pickers (and tractors) are listed in Table 5.

Increasing the annual hours of use reduces the calculated cost per pound for both systems but increases the difference in the cost between systems and the savings associated with the new system.

More important than the actual savings between systems, increasing the annual hours of use improves the efficiency of the better system. For example, in Table 4 (annual hours of use is 200) the cost for the new system when yield is 800 pounds per acre is 9.45 cents per pound.

In Table 5 (annual hours of use is 300), at the same yield the cost is 7.29 cents per pound — a savings of 2.16 cents associated with the increased annual hours of use for the new (picker with an onboard module builder) system for each and every pound harvested (7,000 × 800 pounds per acre × 2.16 cents per pound equals $120,960).

Growers will prefer the new system to the old system. They should manage their operations to make the number of acres per picker as large as possible. How large will depend on the physical characteristics of their farms (that share the pickers), their attitude toward risks and their ability to assume risk.

A large number of acres per picker increases the likelihood of yield and quality losses and a small number of acres per picker increases harvest cost.